My first car was a 1979 hunter green Volvo (circa 1998). I loved it! Sure, I had to keep one foot on the gas and one on the brake at stop lights so that it wouldn’t cut off because it idled so low, but it had a brand new paint job and a cassette player which was all that mattered to me at the time.
When I graduate from college, landed my first job, and lived rent free with my grandparents, I decided to get a new car. Since I had so few living expenses, I decided to buy a BMW. My husband (fiancé at the time) talked me out of it. Thank goodness! Being the frugal/sensible one, he knew that having a high car payment wouldn’t be so great when I also had rent to pay, a down payment to save for, and, one day, a mortgage. (At the time, I was not as appreciative of his wisdom.)
Now to my point of the post: A car payment can really affect your purchase power when you go to qualify for a mortgage loan. Here’s a breakdown based on an 30 year loan with an interest rate of 3.5%.
$400 car payment=$89,077 of home
$500 car payment=$111,347 of home
$600 car payment=$133,616 of home
It’s important for prospective home buyers to know this information. A fancy new car might smell divine and ride like a dream, but, if you have to squeeze you, your wife, and your three kids into a two bedroom house, that car might not look so appealing. Also, if you need a new car and a new house around the same time, it’s in your best interest to get the home purchase squared away first.
If you are interested in purchasing or refinancing in one of the following states, please contact me and I will be happy to connect you with a licensed loan officer near you: Maryland, Delaware, Connecticut, Florida, Georgia, Maine, Massachusetts, New Hampshire, New Jersey, North Carolina, Pennsylvania, Rhode Island, South Carolina, Washington D.C., or West Virginia.